New South Wales Supreme Court CITATION : Rapid Metal Developments (Aust) Pty Ltd v Build Max Corporation Pty Ltd; Application of EFI Constructions (NSW) Pty Ltd [2000] NSWSC 1190 CURRENT JURISDICTION: Equity Division Corporations List FILE NUMBER(S) : SC 3373/2000 HEARING DATE(S) : 23/11/2000 JUDGMENT DATE : 23 November 2000 Rapid Metal Developments (Aust) Pty Ltd (P) PARTIES : Build Max Corporation Pty Ltd (D) EFI Constructions (NSW) Pty Ltd (Applicant) JUDGMENT OF : Young J COUNSEL : R Harper and J Gillespie (Applicant) D G Charles (D) SOLICITORS : The Law Partnership (Applicant) Conditsis & Associates (D) CATCHWORDS : CORPORATIONS [228]- Winding up application- Money being received by company before hearing- Court may protect creditors by injunction or otherwise. LEGISLATION CITED : Corporations Law, ss 467, 468, 513A CASES CITED : Alati v Wei Sheung (2000) 34 ACSR 489 DECISION : See para 12. THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST YOUNG J THURSDAY 23 NOVEMBER 2000 3373/2000 - RAPID METAL DEVELOPMENTS (AUST) PTY LTD v BUILD MAX CORPORATION PTY LTD; APPLICATION OF EFI CONSTRUCTIONS (NSW) PTY LTD JUDGMENT 1 HIS HONOUR: This is an application under s 467(1) of the Corporations Law for an injunction to prevent the defendant company (the "Company") from dealing with funds that it is about to receive until the Court can deal with an application to substitute the present applicant as the petitioner to wind up the Company, or, alternatively, until the Company is wound up or the application to wind up is dismissed. 2 The essential facts are that the Company is building blocks of units on the Central Coast. The applicant is a formwork company which claims to be owed money in respect of work it did in the erection of the units. The quantum of the claim is disputed but it would appear on the material before me, whichever way one looks at it, that the applicant is owed at least $34,000 so that the applicant is a creditor of the Company. In any event, there are two other companies, Esanda Finance Corporation Ltd and Unidrill Pty Ltd, which have supported the application to wind up and the present application. 3 On Monday, 27 November 2000, or shortly afterwards, the Company is likely to receive from Suncorp Metway Ltd substantial moneys from the sale of units in the development known as "Quay North". The applicant is concerned that if these moneys are received then they may be disbursed in a preferential way. 4 The Company wishes to put on further evidence as to its needs to deal with its funds. However, it says it needs seven days to put on that material, so it is necessary to consider what orders should be made in the meantime. 5 Up until relatively recently the scheme of the Corporations Law was that when a court ordered a company be wound up, the winding up commenced on the date when the summons or petition to wind the company up was filed. Accordingly, any transaction that took place after the filing of the summons or petition was automatically avoided under s 468 of the Corporations Law or its predecessor on the winding up order being made. However, by section 513A of the Corporations Law, this scheme was changed so that ordinarily the winding up commences at the time when the order is made. This means that s 468 does not automatically vitiate payments and it is left to the Court under s 467 to preserve the status quo pending the hearing of the summons. 6 As I indicated in Alati v Wei Sheung (2000) 34 ACSR 489, there is a wide power under s 467 of the Corporations Law and the Court has to use that power to see that the dominant purpose of the winding up provisions of the Law are observed, namely, that if a company is insolvent there should not be any preferential treatment of creditors and the assets of the company should be preserved. 7 Mr Charles, for the Company, says that on his instructions the Company is solvent. I am sure everyone here is glad to hear that and will look forward to seeing the evidence that will establish it. However, at the moment there is sufficient material to show that there are creditors pressing for its winding up, which creditors do not seem to be able to be paid from the Company's current funds. 8 Accordingly, we have a situation where, prima facie, there are creditors who cannot be paid. There are moneys flowing into the Company in the near future about which no sufficient undertaking is given, and it seems to me that in the spirit of the legislation some order should be made to preserve those funds until the appropriate evidence is in or the application for substituted service and/or winding up is dealt with. 9 It may well be that when a company is trading the appropriate order is for a provisional liquidator to be appointed. However, the present Company is apparently only trading to a limited extent and no one urges me to take that course. An injunction for a period of about ten days is accordingly needed and the question is what the terms of it should be. 10 The applicant seeks a wide order, but the Company says that the order should be softened by allowing some payments to be made. This appeared to be a sensible way of proceeding and I adjourned for a quarter of an hour so that the parties could work out some sort of order. I thought that it would be appropriate to include in the order an exclusion of transactions which are in the ordinary course of the Company's ordinary business, or transactions to which the applicant's solicitors consent. However after that break the parties were unable to agree. It would appear that there are relatively few current transactions being carried on in the sense of continuous building work. It appears that the Company proposes to pay persons who may already be creditors in respect of past debts. That cannot happen. 11 Accordingly, as I am only considering an injunction for about ten days, I should probably put it in the wider form. 12 Accordingly, the Court up to and including 4 December 2000 orders that the defendant by itself, its servants or agents, be restrained from disbursing, spending or otherwise dealing with any moneys received from the proceeds of sale of units in the development known as "Quay North" or from assigning in any way any of such funds without the prior written consent of the solicitors for the applicant or order of the Court. That order is made upon me noting the usual undertaking as to damages given by the applicant. 13 I stand the matter over to the Corporations Judge's list at 10 am on 4 December 2000. I order that any affidavit to be relied on by the Company is to be filed and served no later than 4 pm on 30 November 2000. 14 I note that Mr Harper, for the applicant, applies for costs. In view of the terms of the Corporations Law the Court notes that some special order for costs should in due course be made and stands that matter over also to 4 December 2000. ****************** Last Modified: 12/14/2000 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.